One Man’s Opinion: Will Sequestration Have A Negligible Effect On Global GDP?

Ulli Market Commentary Contact

92835431The effect of sequester on US GDP is sizable but not huge, and we need to care about it, says Georg Grodzki, credit research head at Legal & General Investment Management in London.

Even if the effect is 0.5 percent (on the downside), which is the consensus reading, it’s not an insignificant number. The good news is that the US economy has shown very good signs of life so far this year. The US consumer sentiment is strong while latest data show the overall housing market has bounced back from the bottom.

The US economy is clearly in a much better position to take such a hit than it was a year ago. So at the end of the year, we could see an impact of 0.2 to 0.3 percent on the GDP, which is deplorable, but not that bad, Georg noted. Many investors in the US may actually find it encouraging that the government finally gets on the job of cutting deficits even though it’s doing so in a haphazard fashion, he added.

When pointed out the equity markets clearly didn’t price in the spending cut, as demonstrated by the recent rally, Georg said if you look at the global picture, growth is certainly going to be positive this year. The share of US economy in the global GDP is shrinking; so a 0.3-0.4 percent decline in US economy translates into less than 0.1 percent decline globally and hence one could shrug it off. Nonetheless, it’s significant and can’t be overlooked completely, he observed.

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New ETFs On The Block: SPDR Russell 1000 And Russell 2000 Low Volatility ETF (LGLV, SMLV)

Ulli Low Volatility ETFs Contact

88338768State Street Global Advisors, the Boston, Massachusetts-based second largest ETF provider globally, has launched two low volatility funds, the SPDR Russell 1000 Low Volatility ETF (LGLV) and the SPDR Russell 2000 Low Volatility ETF (SMLV), marking its entry into the low-volatility large-cap and small-cap US equity space.

The funds track the low volatility versions of the widely followed Russell 1000 and Russell 2000 indexes, which measure the performances of the large-cap and small-cap low volatility segment of the US market and were once used in Russell ETFs that were liquidated last year. Both the funds are designed to neutralize factors such as beta and momentum while managing turnover, according to the company’s press release. The Russell 1000 Low Volatility Index contains no more than 200 securities while the Russell 2000 Low-Vol Index contains no more than 400 securities. Both the indices are reconstituted monthly to maintain focus on low volatility.

Low-vol products have found favor with investors for their superior risk-adjusted returns and is likely to appeal to people who want to reduce their downside risks amid current state of affairs where geo-political risks run high both at home and abroad.

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03-01-2013

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, March 1, 2013

ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2013/02/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-02282013/

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Market Commentary

Friday, March 1, 2013

US INDEXES RISE AS DATA OFFSETS SEQUESTER; EUROPE FALLS ON ECONOMIC DATA, CHINA

US indexes advanced Friday, wiping out earlier losses as upbeat manufacturing and consumer confidence data offset concern about government spending cuts.

The Institute for Supply Management’s manufacturing index rose to 54.2, the highest reading since June 2011 and a surprise improvement from January’s 53.1.

The University of Michigan/Thomson Reuters consumer sentiment index rose to a final February reading of 77.6, the highest since November.

Separately, government data showed consumer spending in the US rose in January even as incomes dropped the most in 20 years, showing households are so far weathering the hike in payroll taxes. Ahead of the US open, data showed China’s manufacturing slowed for a second month while factory-output in the 17-member euro area shrank for the 19th straight month.

Federal Reserve Bank of Chicago chief Charles Evans said the Fed should stick to its $85 billion in monthly bond purchases, warning a sudden withdrawal may undermine the recovery process.

As a result, the Dow Jones Industrial Average (DJIA) added 35 points to finish at 14,090, which is 75 points from its all-time closing high hit on Oct 9, 2007. The blue-chip index added 0.3 percent for the week.

The S&P 500 Index (SPX) rose 4 points to 1,518 with healthcare leading the gains and industrials sliding the most among its 10 business groups. The benchmark index is up 0.2 percent for the week.

Treasury prices rose for a second day, triggering the biggest weekly drop in 10-year yields since September, as investors grew weary the $85 billion of federal spending cuts will derail the economy’s recovery.

The euro fell below the key $1.30 level Friday, dropping to its lowest level this year as a wave of downbeat data from Europe spurred demand for safer assets.

Meanwhile, European bourses trimmed losses after upbeat US manufacturing and consumer confidence data helped counter record high unemployment in the euro zone and weak Chinese business activity reading in February.

The Stoxx Europe 600 index shed 0.3 percent to close at 289.02, but finished the week 0.2 percent higher to mark its second weekly gain in a row. European markets finished February with a ninth straight monthly gain as global central bank chiefs signaled continuation of the current loose monetary policies.

Our Trend Tracking Indexes (TTIs) showed a mixed picture as the Domestic TTI rose and the International TTI slipped a bit. Here are this week’s closing numbers:

Domestic TTI: +3.10% (last week +2.84%)

International TTI: +8.56% (last week +9.31%)

Have a great week.

Ulli…

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READER Q & A FOR THE WEEK

All Reader Q & A’s are listed at our web site!
Check it out at:

http://www.successful-investment.com/q&a.php

A note from reader Steve:

Q: Ulli: Can you provide a basic explanation of your momentum (M-Index) without giving away your proprietary method?

A: Steve: All terms are described in the Glossary section, which is posted on the top of every StatSheet. In case you missed it, you can read it here:

http://www.successful-investment.com/GlossaryOfTerms.pdf

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WOULD YOU LIKE TO HAVE YOUR INVESTMENTS PROFESSIONALLY MANAGED?

Do you have the time to follow our investment plans yourself? If you are a busy professional who would like to have his portfolio managed using our methodology, please contact me directly or get more details at:

https://theetfbully.com/personal-investment-management/

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Back issues of the ETF/No Load Fund Tracker are available on the web at:

https://theetfbully.com/newsletter-archives/

ETF/No Load Fund Tracker Newsletter For Friday, March 1, 2013

Ulli ETF Tracker Contact

ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2013/02/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-02282013/

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Market Commentary

Friday, March 1, 2013

US INDEXES RISE AS DATA OFFSETS SEQUESTER; EUROPE FALLS ON ECONOMIC DATA, CHINA

US indexes advanced Friday, wiping out earlier losses as upbeat manufacturing and consumer confidence data offset concern about government spending cuts.

The Institute for Supply Management’s manufacturing index rose to 54.2, the highest reading since June 2011 and a surprise improvement from January’s 53.1.

The University of Michigan/Thomson Reuters consumer sentiment index rose to a final February reading of 77.6, the highest since November.

Separately, government data showed consumer spending in the US rose in January even as incomes dropped the most in 20 years, showing households are so far weathering the hike in payroll taxes. Ahead of the US open, data showed China’s manufacturing slowed for a second month while factory-output in the 17-member euro area shrank for the 19th straight month.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 02/28/2013

Ulli ETF StatSheet Contact

ETF/Mutual Fund Data updated through Thursday, February 28, 2013

Table of Content082312

If you are not familiar with some of the terminology used, please see the Glossary of Terms.

 

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY — since 10/25/2011

TTI

The domestic TTI broke through its long-term trend line generating a Sell for this area effective 8/9/2011. Over the recent past, we’ve seen the TTI hovering slightly below and above this dividing line between bullish and bearish territory. The clear break to the upside occurred on 10/24/11 and, effective 10/25/11, a new Buy signal for domestic equities went into effect.

As of today, our Trend Tracking Index (TTI—green line in above chart) has bounced off its long term trend line (red) by +3.12% as part of the post election rebound.

To avoid a potential whip-saw, a Sell signal to move out of all domestic equity positions will be generated once we have clearly pierced the line to the downside. Be sure to tune into my blog for the latest updates.

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Indexes Retreat As Senate Rejects Sequestration Plan; Europe Rises On Draghi, Bernanke

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

US indexes did an about face and retreated in the final minutes of trading erasing earlier gains after a Senate vote kept $85 billion of automatic spending cuts in place starting at midnight, and data on growth and employment gave out mixed signals about the economy’s health.

Gains in the US equity averages fizzled out after the Senate rejected a pair of bipartisan proposals to replace $85 billion in automatic spending cuts starting tomorrow.

GDP growth reading also weighed on investors after a Commerce Department report showed the US economy grew by a negligible 0.1 percent in the final quarter of 2012 on an annual basis, up from the initially estimated 0.1 percent drop. The revised reading, however, was well short of the 0.5 percent growth economists were expecting. For all of 2012, the US economy grew at a 2.2 percent rate.

On an upbeat note, weekly jobless claims however, fell sharply by 22,000 to 344,000 last week, suggesting companies were looking beyond spending cuts by the government and were maintaining staffing.

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